The Secondary Mortgage Market Flashcards
What is the role of the secondary mortgage market?
The secondary mortgage market consists of holding warehouse agencies that purchase a number of mortgage loans and assemble them into one or more packages of loans for resale to investors.
Who are the three major players in the secondary mortgage market?
Ginnie Mae
Fannie Mae
Freddie Mac
What was the first mortgage-backed security called and why was it called this?
It was called a pass-through security because the monthly principal and interest payments were collected from the borrowers and then “passed through” to the investors.
What is Ginnie Mae’s most heavily traded product and what is the minimum pool size?
Ginnie Mae I MBS is the most heavily-traded MBS product, based on single-family pools. The minimum pool size is $1 million.
Why did the federal government establish Fannie Mae?
The federal government established Fannie Mae to increase the flow of mortgage money by creating a secondary market to purchase Federal Housing Administration (FHA)-insured mortgages.
What important action took place with the 1968 Charter Act?
Under the 1968 Charter Act, Fannie Mae became a fully private company operating with private capital on a self-sustaining basis. Its role was expanded to buy mortgages beyond traditional government loan limits.
What automated underwriting systems does Fannie Mae have available for users and for whom are they designed?
Desktop Underwriter (DU) ® is designed for lenders. Desktop Originator (DO) ® is designed for brokers and correspondents.
Name and explain the two Native American loan programs supported by Fannie Mae.
Section 184 loans are specifically designed for American Indian and Alaska Native families, Alaska Villages, Tribes, or Tribally Designated Housing Entities. Section 184 loans can be used, both on and off native lands, for new construction, rehabilitation, purchase of an existing home, or refinance.
Section 248 loans are available for homes located on Indian tribal trust land or restricted land, including Alaska native areas
Why was Freddie Mac created and what is its mission?
Freddie Mac was created in 1971 to develop a mortgage-backed security for conventional loans. Freddie Mac’s mission is to provide stability, affordability and opportunity to the housing market by putting home ownership within reach for minority populations and making rental housing more affordable.
The Freddie Mac Affordable Merit Rate Mortgages are designed for whom?
Borrowers with weak credit reputations or past credit challenges
What do Home Possible mortgages do?
Home Possible Mortgages offer flexible underwriting, low-to-no down payments, expanded loan-to-value (LTV) ratios and other special underwriting features to underserved qualified borrowers.
Explain Don’t Borrow Trouble.
Don’t Borrow Trouble is an anti-predatory lending campaign, combining extensive public education with comprehensive counseling services. This program is designed to help homeowners avoid scams and resolve any financial difficulties they may be experiencing.
The secondary mortgage market consists of
holding warehouse agencies that purchase a number of mortgage loans and assemble them into one or more packages of loans for resale to investors.
Mortgage funds can be shifted to where they are most needed in a variety of ways.
Lenders can sell loans to one another.
One institution can sell a part interest in a block of loans to another institution.
A more common way of shifting funds is through the use of mortgage-backed securities (MBS), which are backed by a pool of mortgages.
Important players in the secondary mortgage market are:
Ginnie Mae – Government National Mortgage Association (GNMA) – a government agency
Fannie Mae – Federal National Mortgage Association (FNMA) – a former government agency that became a private corporation in 1968
Freddie Mac – Federal Home Loan Mortgage Corporation (FHLMC) – a quasi-government agency
